Bill Text: CA SB1262 | 2009-2010 | Regular Session | Introduced
Bill Title: High deductible health plans: health savings accounts.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2010-04-12 - Set, first hearing. Failed passage in committee. (Ayes 3. Noes 3. Page 3164.) Reconsideration granted. [SB1262 Detail]
Download: California-2009-SB1262-Introduced.html
BILL NUMBER: SB 1262 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Aanestad
FEBRUARY 19, 2010
An act to add Sections 22869.5 and 22917 to the Government Code,
and to amend Sections 17072, 17131.4, 17131.5, 17215, 17215.1,
17215.4, and 19184 of, and to add Sections 17138.5, 17138.6, and
17216 to, the Revenue and Taxation Code, relating to health care, and
making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
SB 1262, as introduced, Aanestad. High deductible health plans:
health savings accounts.
Under the Public Employees' Medical and Hospital Care Act, the
Board of Administration of the Public Employees' Retirement System
contracts for and administers health care benefit plans for public
employees and annuitants. Existing state and federal income tax laws
allow a deduction for contributions to a qualifying medical savings
account by a taxpayer who is covered under a high deductible health
plan, as defined. Money within this type of account may be used to
pay for qualified medical expenses, as defined.
This bill would require the board to offer a high deductible
health plan, as defined in the federal tax law, and a Health Savings
Account option to public employees and annuitants, as specified. The
bill would establish the Public Employees' Health Savings Fund, a
continuously appropriated trust fund within the State Treasury, for
payment of qualified medical expenses of eligible employees and
annuitants who elect to enroll in the high deductible health plan and
participate in the Health Savings Account option, and would require
those employees and annuitants, and their employers, to make
specified contributions to that fund, thereby making an
appropriation.
The Personal Income Tax Law authorizes various deductions in
computing income subject to taxation.
This bill would also allow a deduction in connection with Health
Savings Accounts in conformity with federal law. In general, the
deduction would be an amount equal to the aggregate amount paid in
cash during the taxable year by, or on behalf of, an eligible
individual, as defined, to a Health Savings Account of that
individual, as provided. This bill would also provide related
conformity to that federal law with respect to treatment of the
account as a tax-exempt trust, the allowance of rollovers from Archer
Medical Savings Accounts to a Health Savings Account, and penalties
in connection therewith.
Vote: majority. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 22869.5 is added to the Government Code, to
read:
22869.5. (a) The board shall offer a Health Savings Account
option to all employees and annuitants. In addition to the basic
health benefit plans described in Sections 22830 and 22850, and
notwithstanding any other provision of this part, the board shall
approve at least one high deductible health plan, as defined in
Section 223(c)(2) of the Internal Revenue Code.
(b) The design and administration of the Health Savings Account
option shall comply with the standards provided in Section 223 of the
Internal Revenue Code and any other applicable revenue procedures or
provisions of the Internal Revenue Code and the Revenue and Taxation
Code.
(c) (1) An employee or annuitant who qualifies as an eligible
individual, as defined in Section 223(c)(1)(A) of the Internal
Revenue Code, and who elects to participate in the Health Savings
Account option shall enroll in a high deductible health plan offered
by the board and shall contribute the total cost per month of the
benefit coverage afforded him or her under that plan less the portion
thereof to be contributed by the employer.
(2) The employee or annuitant shall also designate an additional
amount to be deducted from his or her salary or retirement allowance
for qualified medical expenses. The amount shall be no less than
fifty dollars ($50) per month. The amount shall be deposited into the
Public Employees' Health Savings Fund and shall be credited to a
nominal, interest-bearing account in the name of the employee or
annuitant.
(3) For purposes of this section, "qualified medical expenses"
means those expenses as defined in Section 223(d)(2) of the Internal
Revenue Code.
(d) (1) The employer of an employee or annuitant who elects to
participate in the Health Savings Account option shall contribute a
portion, pursuant to Article 7 (commencing with Section 22870) or
Article 8 (commencing with Section 22890), of the cost of providing
the benefit coverage under the high deductible health plan.
(2) The employer shall also contribute an amount equal to the
difference between the amount contributed pursuant to paragraph (1)
and the weighted average of the health benefit plan premiums the
employer would have paid if the employee or annuitant had enrolled in
a plan other than the high deductible health plan, and that amount
shall be deposited into the Public Employees' Health Savings Fund and
shall be credited to a nominal account in the name of the employee
or annuitant.
(e) The limit on contributions made to an employee's or annuitant'
s Health Savings Account by the employee, annuitant, or the employer
of the employee or annuitant shall not exceed the maximum limit set
by the Internal Revenue Code for a Health Savings Account.
(f) Moneys credited to the employee's or annuitant's nominal
account in the Public Employees' Health Savings Fund shall be
disbursed to pay qualified medical expenses incurred by the employee
or annuitant, in accordance with Section 223 of the Internal Revenue
Code.
(g) The board shall adopt regulations necessary to implement this
section.
SEC. 2. Section 22917 is added to the Government Code, to read:
22917. (a) There is in the State Treasury a Public Employees'
Health Savings Fund, the purpose of which is to pay the qualified
medical expenses of holders of Health Savings Accounts pursuant to
Section 22869.5 and pursuant to Section 223 of the Internal Revenue
Code. The board shall have the exclusive control of the
administration and investment of the fund.
(b) The Public Employees' Health Savings Fund shall consist of
moneys deducted from the salary or retirement allowance of an
employee or annuitant, and moneys contributed by the employee's or
annuitant's employer, for qualified medical expenses pursuant to
Section 22869.5. Those moneys shall earn interest income.
(c) The board may invest funds in the Public Employees' Health
Savings Fund pursuant to the law governing its investment of the
retirement fund, subject to the limitations contained in Section 223
of the Internal Revenue Code. Income, of whatever nature, earned on
the fund during any fiscal year shall be credited to the fund.
(d) Notwithstanding Section 13340, the Public Employees' Health
Savings Fund is continuously appropriated, without regard to fiscal
years, to reimburse qualified medical expenses of holders of Health
Savings Accounts.
(e) The Legislature finds and declares that the Public Employees'
Health Savings Fund is a trust fund held for the exclusive benefit of
employees and annuitants who elect the Health Savings Account option
pursuant to Section 22869.5.
SEC. 3. Section 17072 of the Revenue and Taxation Code is amended
to read:
17072. (a) Section 62 of the Internal Revenue Code, relating to
adjusted gross income defined, shall apply, except as otherwise
provided.
(b) Section 62(a)(2)(D) of the Internal Revenue Code, relating to
certain expenses of elementary and secondary school teachers, shall
not apply.
(c) The deduction allowed by Section 17216, relating to Health
Savings Accounts, shall be allowed in computing adjusted gross
income. This subdivision shall apply only to each taxable year
beginning on or after January 1, 2010.
SEC. 4. Section 17131.4 of the Revenue and Taxation Code is
amended to read:
17131.4. (a) Section 106(d) of the Internal
Revenue Code, as added by Section 1201 of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (Public
Law 108-173), relating to contributions to health savings
accounts, shall not apply.
(b) This section shall apply only to taxable years beginning on or
after January 1, 2005, and before January 1, 2010.
SEC. 5. Section 17131.5 of the Revenue and Taxation Code is
amended to read:
17131.5. (a) Section 125(d)(2)(D) of the
Internal Revenue Code, as added by Section 1201 of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (Public
Law 108-173), relating to the exception for health savings
accounts, shall not apply.
(b) This section shall apply only to taxable years beginning on or
after January 1, 2005, and before January 1, 2010.
SEC. 6. Section 17138.5 is added to the Revenue and Taxation Code,
to read:
17138.5. For each taxable year beginning on or after January 1,
2010, Section 106 of the Internal Revenue Code, as amended by Section
1201 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), relating to Health
Savings Accounts, shall apply, except as otherwise provided.
SEC. 7. Section 17138.6 is added to the Revenue and Taxation Code,
to read:
17138.6. For each taxable year beginning on or after January 1,
2010, Section 125 of the Internal Revenue Code, as amended by Section
1201 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), relating to Health
Savings Accounts, shall apply, except as otherwise provided.
SEC. 8. Section 17215 of the Revenue and Taxation Code is amended
to read:
17215. (a) Section 220(a) of the Internal Revenue Code, relating
to deduction allowed, is modified to provide that the amount allowed
as a deduction shall be an amount equal to the amount allowed to that
individual as a deduction under Section 220 of the Internal Revenue
Code, relating to medical savings accounts, on the federal income tax
return filed for the same taxable year by that individual.
(b) Section 220(f)(4) of the Internal Revenue Code, relating to
additional tax on distributions not used for qualified medical
expenses, is modified by substituting "10 percent" in lieu of "15
percent."
(c) Section 220(f)(5) of the Internal Revenue Code, as amended by
Section 1201(c) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), relating to permitted
rollovers from Archer Medical Savings Accounts, shall apply, except
as otherwise provided.
(d) The amendments made to this section by the act adding this
subdivision shall apply only to each taxable year beginning on or
after January 1, 2010.
SEC. 9. Section 17215.1 of the Revenue and Taxation Code is
amended to read:
17215.1. (a) Section 220(f)(5) of the
Internal Revenue Code, as added by Section 1201 of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (Public
Law 108-173), relating to rollover contributions, shall not
apply.
(b) This section shall apply only to taxable years beginning on or
after January 1, 2005, and before January 1, 2010.
SEC. 10. Section 17215.4 of the Revenue and Taxation Code is
amended to read:
17215.4. (a) Section 223 of the Internal
Revenue Code, as added by Section 1201 of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (Public
Law 108-173), relating to health savings accounts, shall not
apply.
(b) This section shall apply only to taxable years beginning on or
after January 1, 2005, and before January 1, 2010.
SEC. 11. Section 17216 is added to the Revenue and Taxation Code,
to read:
17216. For each taxable year beginning on or after January 1,
2010, all of the following apply:
(a) Section 223 of the Internal Revenue Code, as added by Section
1201 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), relating to Health
Savings Accounts, shall apply, except as otherwise provided.
(b) Section 223(e)(1) of the Internal Revenue Code, as added by
Section 1201 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), shall be modified by
substituting the phrase "Section 17651" for the phrase "Section 511
(relating to imposition of tax of unrelated business income of
charitable, etc., organizations)," contained therein.
(c) Section 223(f)(4)(A) of the Internal Revenue Code, as added by
Section 1201 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), shall be modified by
substituting "21/2 percent" for "10 percent," contained therein.
SEC. 12. Section 19184 of the Revenue and Taxation Code is amended
to read:
19184. (a) A penalty of fifty dollars ($50) shall be imposed for
each failure, unless it is shown that the failure is due to
reasonable cause, by any person required to file who fails to file a
report at the time and in the manner required by any of the following
provisions:
(1) Subdivision (c) of Section 17507, relating to individual
retirement accounts.
(2) Section 220(h) of the Internal Revenue Code, relating to
medical savings accounts for taxable years beginning on or after
January 1, 1997.
(3) Section 223(h) of the Internal Revenue Code, as added by
Section 1201 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173), relating to Health
Savings Accounts.
(3)
(4) Subdivision (b) of Section 17140.3 or subdivision
(b) of Section 23711 relating to qualified tuition programs.
(4)
(5) Subdivision (e) of Section 23712, relating to
Coverdell education savings accounts.
(b) (1) Any individual who:
(A) Is required to furnish information under Section 17508 as to
the amount designated nondeductible contributions made for any
taxable year, and
(B) Overstates the amount of those contributions made for that
taxable year, shall pay a penalty of one hundred dollars ($100) for
each overstatement unless it is shown that the overstatement is due
to reasonable cause.
(2) Any individual who fails to file a form required to be filed
by the Franchise Tax Board under Section 17508 shall pay a penalty of
fifty dollars ($50) for each failure unless it is shown that the
failure is due to reasonable cause.
(c) Article 3 (commencing with Section 19031) of this chapter
(relating to deficiency assessments) shall not apply in respect of
the assessment or collection of any penalty imposed under this
section.
(d) The amendments made to this section by the act adding this
subdivision shall apply only to each taxable year beginning on or
after January 1, 2010.
SEC. 13. (a) The amendments made by this act to Sections 17072,
17215, and 19184 of the Revenue and Taxation Code incorporate, by
reference, the provisions of Section 1201 of the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (Public
Law 108-173), which added Section 223 of the Internal Revenue Code
to Part VII of Subchapter B of Chapter 1 of Subtitle A of the
Internal Revenue Code and amended Sections 62, 106, 125, and 220 of
the Internal Revenue Code, and shall apply retroactively to taxable
years beginning on or after January 1, 2010.
(b) The Legislature finds and declares that this act fulfills a
statewide public purpose because of the following:
The State of California has not yet conformed its state income tax
law to the provisions of Section 1201 of the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003 (Public Law
108-173). As a result, the taxpayers who have converted their Archer
Medical Savings Accounts into Health Savings Accounts pursuant to
Sections 220 and 223 of the Internal Revenue Code may be subject to
tax and penalties under state, but not federal, income tax laws. This
act provides necessary relief from the tax and penalties to the
taxpayers who have converted their Archer Medical Savings Accounts
into Health Savings Accounts in taxable years beginning on or after
January 1, 2010.
(c) If, by the operation of any law or rule of law, including res
judicata, a refund or credit of any overpayment of tax resulting from
the retroactive application of the amendments made to Sections
17072, 17215, and 19184 of the Revenue and Taxation Code by this act
is prevented at any time before the close of the two-year period
beginning on the effective date of this act, that refund or credit
may nonetheless be made or allowed, provided that the claim for
refund or credit is filed before the close of that period.
